This interview is part of our new Blockchain In Lending series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and lending.
In this interview we speak with Kelly Pettersen, Head of Business and Growth at Lendingblock, to understand how her company is using blockchain to transform the lending business, and what the future of the industry holds.
1. What's the story behind Lendingblock? Why and how did you begin?
KP: Borrowing and lending has always played a critical role in mature capital markets. 15 percent of the overall US stock market ($2 trillion) is on loan, generating billions of dollars in income for lenders. With the belief that the same drivers for borrowing and lending apply to digital assets, Lendingblock formed in early 2018. Our team is passionate about the world of blockchain and has over 200 combined years of financial markets experience — we came together to build an institutional lending platform for hedge funds, asset managers, exchanges, market makers and other market participants. To this point, institutions have been underserved by the fragmented infrastructure of the crypto financial market, and Lendingblock provides key infrastructure to make it safer and easier for institutions to borrow, lend, access liquidity, and generate an enhanced yield on a broad portfolio of digital assets.
2. Please describe your use case and how Lendingblock uses blockchain
KP: Institutions use the Lendingblock exchange to make their digital assets work harder. Market participants may want to lend balance sheet or fund holdings out to generate interest income. Others may want to execute trading strategies and borrow to short, hedge, or use for working capital purposes. Market makers may look to arbitrage crypto loans across terms. All loans are fully collateralized so that the lender's exposure to the borrower is always covered, and Lendingblock manages the full post-trade lifecycle. Lendingblock interacts with a centralized blockchain built on the Ethereum protocol for sending principal, collateral, and fees. Each transaction is transmitted securely and transparently, then logged in the smart contract that’s created for the entire lifecycle of the loan.
3. Could you share a specific customer/user that benefits from what you offer? What has your service done for them?
KP: Lendingblock is aiming to launch its institutional lending exchange later this year. We are pleased to already have a portfolio of well-established institutional players signed up and using our platform in a sandbox environment. Our clients tell us that they enjoy a number of differentiating benefits that other lending venues do not provide. Clients can enjoy full price discovery from Lendingblock's transparent order book. A marketplace where they can gain access to other institutional counterparties that have been subject to the highest standard of know-your-customer and anti-money-laundering checks. All loans are fully collateralized, so there is virtually no counterparty risk.Lendingblock acts as a third party agent to provide margin management, custody, and insurance.
4. What other blockchain lending use cases are you excited about?
KP: The state of the lending market is still quite fragmented, and at Lendingblock, we feel that the market is still in its early days. While there are some digital asset lending options available — from P2P lenders to margin lenders to OTC desks — Lendingblock is excited to build something that complements all of these. Applying the securities lending model to crypto and providing an institutional marketplace for makers and takers of loans will provide a connected infrastructure that all the other lending players can plug into in order to support and complement their business models.
5. Where will Lendingblock be in five years?
KP: Lendingblock will be the institutional infrastructure for the digital asset market. It will be a secure, regulated, and transparent marketplace for hedge funds, asset managers, exchanges, market makers, OTC desks, and other market participants to generate additional yield on whatever their trading strategies may be. It will furthermore be the exchange that firms rely on for true price discovery and digital asset yield curves that reflect market value.